I know this will probably never happen, but this is the time of the year when we suspend our cynicism and believe in elves and flying reindeer, so forgive me if I indulge in a little impossible dreaming on a cold December day.
As I sit here listening to songs that extoll the virtues of peace on earth and goodwill toward men, I’m thinking about the lack of goodwill that the patent system has produced within the tech industry.
Apple’s lawsuits have resulted in a (now-lifted) ban on sales of the Galaxy Tab in Australia. Motorola Mobility’s lawsuits have obtained a similar injunction against the sale of Apple’s 3G-enabled iOS devices across Europe. HTC is facing the possibility of having its smartphones banned in the U.S., if a December 14 ruling goes in Apple’s favor.
Is this really what the original concept of patent protection was intended to do? It’s the consumers who suffer as competition is stifled and products they’re waiting for aren’t allowed to come to market.
Where’s Microsoft in all this?
Microsoft has been involved in its share of patent lawsuits, both as the plaintiff and as the defendant. And they’ve won some and lost some. In one of the most high-profile cases recently, the company claimed that Android devices infringe on its patents and signed deals with ten companies — including Samsung, HTC, and Acer — that reportedly cover around half of all Android devices.
Microsoft itself pays big bucks to license patented technologies from other companies. According to their general counsel, Brad Smith, the company has paid more than $4.5 billion to other companies for licensing fees over the past decade.
When it comes to patents, it seems as if everybody is suing everybody in a shotgun approach that undoubtedly makes the lawyers happy. In the summer of 2010, Microsoft cofounder Paul Allen sued most of the major players in the tech industry (except Microsoft and Amazon) for violations of patents that cover online commerce and displaying information such as news updates and stock quotes on web pages.
The explosion in the number of patent lawsuits really revved up in the 1990s, when the annual number of such lawsuits doubled. And the number of patent suits, just in the mobile handset space, has been increasing by about 25 percent per year. In 2011, there were 294 of those mobile patent lawsuits filed in just one month (August).
In fact, in many cases both parties in a patent suit have filed suits against one another. In the tech industry, it has become common for companies to build portfolios of patents that they can then cross-license to other companies whose technologies they want to use, in effect trading licensing agreements.
It’s reminiscent of the old “MAD” (Mutually Assured Destruction) theory of global politics, in which each party is kept in check by the knowledge that the other party has similar weaponry to use against it. So, if you deny me the ability to use your patented technology, I’ll deny you the ability to use mine, and we’ll both be destroyed (or at least critically hampered).
This “stockpiling of patents” as a defensive measure is often behind acquisitions of companies that wouldn’t seem to have much value to the buyer — but do because of the patents they hold. This was a reason given by Larry Page for Google’s acquisition of Motorola Mobility earlier this year.
Here’s the problem
If everything continues as is, companies will keep piling up the patents and flooding the courts with lawsuits. Attorneys will keep getting richer, as companies spend more and more money to go after violators of their patents and/or defend themselves against charges that they’ve infringed on someone’s patent. The cost of all this litigation will be passed on to the customers who buy these companies’ products.
Innovation will be stifled because only the largest corporations will be able to afford to take the risk of creating new products that may invoke lawsuits. Consumers will have fewer choices — and less competition may mean higher prices, too.
Meanwhile, devices that consumers and businesses want and need will be delayed or even prevented from going on sale altogether. After Apple secured a ban on the Galaxy Tab in Europe, last week the tables turned and Motorola won a ruling that could ban the sale of Apple’s 3G iOS devices in the European market. Taken to its logical conclusion, this “MAD” race could leave us with no mobile devices at all.
What’s the solution?
Remember the only “right move” that the WOPR computer could come up with in War Games (the 1980s movie that was a commentary on the cold war)? After analyzing every possible outcome, the system decided that the only winning move was not to play.
Perhaps if one major player in the tech industry were to be courageous enough to stop playing the patent game, others would follow suit. After all, public opinion is generally negative toward those who sue. Apple, once well-liked by almost everyone, has garnered a reputation as a bully for its barrage of patent lawsuits.
What would happen if Microsoft took the lead in unraveling the tangled mess that the patent system has wrought by declining to sue? Would it start a trend — or would the company immediately be decimated by enemies who would rush in to infringe on all their patents?
Steps in the right direction?
Last summer, Microsoft did actually take a step to take on the patent laws themselves, filing a case with the U.S. Supreme Court — which doesn’t hear ordinary patent disputes — to challenge the level of proof that has been the standard for patent litigation, which differs from that of most other civil cases. Microsoft wanted that standard lowered from “clear and convincing evidence” to “a preponderance of the evidence” for proving a patent invalid. Google and (more interestingly) Apple backed Microsoft in the effort. However, the Solicitor General and Attorney General opposed and the Court ruled against Microsoft.
My impossible dream
Unfortunately, I don’t think there’s a snowball’s chance in the Hot Place that Microsoft will actually do what I’m suggesting. Their patents have been far too lucrative for them to let go of such potential money-makers. Goldman Sachs analysts say Microsoft will take in $444 million from their Android patent fees alone in 2012.
The more likely solution — if there ever is one — will be government intervention, in the form of an overhaul of the patent system. Although an “overhaul” bill — which Microsoft supported- - was signed into law in September, it doesn’t really do much to address the problem of excessive litigation, but rather focuses on expediting the patent application process. That could mean even more patents issued and thus (although the bill is said to be aimed at reducing the legal battles) even more litigation.
So I’m not very hopeful that Microsoft (or anyone else) will fix this problem anytime soon. But it’s a nice little dream.